By Kyle Plotkin
Investment Advisor Representative
[email protected]
As I sat down at my desk on Monday morning, I did my usual scan of the headlines and market outlooks for the day. I regularly keep tabs on several outlets – including Yahoo Finance, the Associated Press, CNN, and, of course, The Wall Street Journal. As a self-admitted news junkie and questionably successful amateur prognosticator, I closely follow business, global, and political developments.
One headline from The Journal caught my eye: “Red vs. Blue Is Dividing Stock Portfolios Like Never Before”.
As you’ve probably noticed, political discourse is nearly impossible to avoid these days. It feels like this polarization has been building for over a decade and now, and nearly every aspect of our lives seems politicized. Personally, I think that’s been a somewhat unfortunate development. In the “good old days”—say, 20 years ago—it was still considered taboo to discuss politics or religion in public settings. While some argue that those topics offer insight into who someone really is, they’ve certainly made social and professional conversations trickier.
There’s always been a difference in economic outlooks between red and blue voters, but today that gap is wider than ever. The Wall Street Journal has been asking the same question since 2001: Do you expect the stock market to go up or down over the next six months?
Back in 2001, the “optimism gap” between Democrats and Republicans was only 13 percentage points. That meant most Americans, regardless of political leaning, expected the market to move in the same direction.
Today, that gap is dramatic. According to recent data, the number of Democrats who expect the market to decline over the next six months exceeds the number of Republicans by a staggering 59 percentage points. Meanwhile, Republicans expecting the market to rise outnumber Democrats by 47 percentage points.
I’ve seen this same divergence firsthand with clients. Some have wanted to get more aggressive in their portfolios since Trump’s inauguration, while others have asked about getting more defensive. Peter and Rob tell me they’ve had similar conversations with clients as well.
It raises an important question: Are our political views shaping our financial outlook so strongly that it feels like we’re living in completely different realities? If you’re curious, just compare the homepage headlines on Fox News and MSNBC—it’s a stark contrast.
So, what should we do with all of this?
In many cases, the best strategy is simply to stay the course. Historically, stock market performance under Republican and Democratic administrations has been surprisingly similar over the long term. You can cherry-pick time periods that favor one party over the other, but taking a step back and viewing the full historical picture shows much less of a difference than you might expect.
As always, our crystal ball remains cloudy—but that’s okay. That’s why we focus on long-term planning, diversified portfolios, and resisting the urge to change course too much as the political winds blow.
Enjoy what looks to be a beautiful summer weekend!
Kyle